It’s the debate that’s destined to keep raging through 2014: Is Canada’s housing market too hot to touch, or set to keep climbing with no ceiling in sight?
“Talk of a ‘soft landing’ for Canada’s real estate market in the new year is misguided,” says one of the country’s biggest brokerages, early out of the 2014 gate, in its quarterly Royal LePage House Price Survey.
“We expect no landing, no slowdown, and no correction in the near-term.”
In fact, price gains are likely to average 3.7 per cent nationally in 2014 as buyers who’ve put purchases on hold the last year or two, expecting a major correction, have watched sales rebound and prices take off again, says Phil Soper, president and chief executive of Royal LePage.
“In the absence of some calamitous event or material increase in mortgage financing costs, we expect this positive momentum to characterize 2014. In fact, we expect a market tipped decidedly in favour of sellers for the first half of the year, after which we project a shift to a more balanced market.”
Those gains are likely to be even bigger in Toronto — Royal LePage predicts prices should climb a further 3.9 per cent in 2014 over average gains of 5.1 per cent in 2013 — as a shortage of lowrise homes in the 416 region continues to drive up average sale prices.
Things aren’t holding up quite so well on the new home housing front, however. Canadian housing starts, which started to cool in the latter part of 2013, are expected to continue their decline into 2014 as affordability, and a significant decline in condo construction, continues to impact sales.
Canadian housing starts slipped 4.1 per cent in December. As of the end of December, some 188,200 units had been started across the country, compared to 215,000 in 2012, according to figures released Thursday. December was the lowest level for low-rise housing starts in 17 years, apart from the 2008 recession, although the slowdown in multi-unit condo construction accounted for most of the decline in building in 2013, according to the figures from the Canada Mortgage and Housing Corp.
Canadian new home prices essentially flatlined, with growth as of November, the most recent figures available, coming in at just 1.4 per cent year over year.
Where housing is headed is really anyone’s guess, with some economists and analysts warning that sales have softened the last three months and could remain that way through the first part of 2014 in the wake of a rush of buyers into the market over the summer as long-term mortgage rates climbed unexpectedly.
One ReMax realtor, with a respectable record of calling the ups and downs of Toronto’s condo market, in particular, blogged this week that he’s heard from so many buyers fed up waiting for prices to drop, he expects to see 95,000 sales transactions this year across the GTA.
That would surpass the previous sales record of 93,193 back in 2007 and last year’s 87,111 sales.
The “moderate” price growth that defined the Vancouver market in 2013 is likely to continue through 2014, Royal LePage anticipates, with prices project to rise 4.4 per cent.
That’s because things are improving on the jobs and economic front, both major drivers of housing demand, notes the survey of some seven housing types in over 250 communities across Canada.
Interest rates are likely to stay put, as well, it says.
But Royal LePage’s most ambitious assumption may be that “aggressive government intervention” — such as further tightening of mortgage lending rules, which knocked many first-time buyers out of the market in the latter part of 2012 and first half of 2013 — is “unlikely to occur in 2014.”
Finance Minister Jim Flaherty has warned repeatedly that he’s especially watching the Toronto and Vancouver markets and is prepared to act again if needed.
Canada’s two priciest markets have had surprisingly rapid comebacks from what Soper terms the country’s “year-long correctional cycle of dramatically slowed sales volumes” that started in 2012.
The survey provides a breakdown of price gains in 17 major Canadian cities, and for three housing types: detached bungalows, standard two-storey homes and condominiums.
The average sale price of a Toronto bungalow was up 3.9 per cent in 2013, followed by 2.7 per cent for two-storey detached homes and 1 per cent for resale condo units, it shows.
The report doesn’t focus any attention on what to expect in the condo sector specifically in 2014, other than to point to a December report commissioned by Royal LePage which said that markets in Toronto, Vancouver and Montreal face some “instability” over the next two years as sales drop off from boom levels and starts outstrip demand.
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